WTO complaints bring Airbus trade war a step nearer

A full-blown trade war between America and Europe over aircraft subsidies moved a step closer yesterday after Washington lodged a formal complaint with the World Trade Organisation over the billions of pounds in government launch aid received by Airbus.

A full-blown trade war between America and Europe over aircraft subsidies moved a step closer yesterday after Washington lodged a formal complaint with the World Trade Organisation over the billions of pounds in government launch aid received by Airbus.

The European Union responded immediately by filing its own complaint with the WTO over the $23bn (£13bn) in subsidies which it claims the US has pumped into the rival aircraft manufacturer Boeing over the past 12 years.

The US wants to scrap a 1992 agreement governing launch aid for large commercial aircraft on the grounds that Airbus is now highly profitable and no longer needs taxpayers' support. However, the EU counters that Boeing has and continues to receive huge subsidies in the shape of tax breaks from Washington state, where the company makes commercial airliners.

The US trade representative, Robert Zoellick, said: "Since its creation 35 years ago, some Europeans have justified subsidies to Airbus as necessary to support an 'infant' industry. If that rationalisation were ever valid, its time has long passed."

The EU Trade Commissioner Pascal Lamy hit back, saying the US complaint was "obviously an attempt to divert attention from Boeing's self-inflicted decline". M. Lamy added: "If this is the path the US has chosen, we accept the challenge, not least because it is high time to put an end to massive illegal US subsidies to Boeing which damage Airbus."

He highlighted support for the new 7E7 Dreamliner, a 250-seater jet from Boeing which is due to enter service in 2008.

Boeing fears that unless the 1992 agreement is scrapped, the EU will use it to provide launch aid for a rival to the 7E7 from Airbus, codenamed the A350.

The EU suspects the US complaint to the WTO is a politically motivated act designed to muster support for President George Bush. However, US trade officials denied the timing of the complaint had been influenced by electioneering.

Boeing's chief executive Harry Stonecipher said it fully supported the action taken by the US government. "Boeing shares the government's view that EU subsidies to Airbus must cease. We remain determined to ensure that competition in the large commercial aircraft market is undistorted by such subsidies."

An Airbus spokesman responded that the 1992 agreement was good for passengers because it increased competition. He said it also benefited taxpayers through the employment Airbus had created and the royalty on aircraft sales that the company paid back to its four sponsor governments.